The Federal Reserve System's latest Beige Book survey has been released. The Dallas Beige Book, along with a link to the national summary and reports from other Federal Reserve Districts, is available online.
October 19, 2009, the Federal Reserve will offer $75 billion in 28-day credit through its term auction facility. Additional information regarding the auction is listed on the Board's website.
State-Dependent Pricing, Local-Currency Pricing, and Exchange Rate Pass-Through, Institute—This paper presents a two-country DSGE model with state-dependent pricing as in Dotsey, King, and Wolman (1999) in which firms price-discriminate across countries by setting prices in local currency.
A Model of International Cities: Implications for Real Exchange Rates—We develop a model of cities each inhabited by two agents, one specializing in manufacturing, the other in retail distribution. The distribution sector represents the physical transformation of all internationally traded goods from the factory gate to the final consumer.
Oil Prices Recover—Oil prices have hovered around $70 per barrel for two months. While up more than 50 percent this year, prices are still more than 30 percent below year-ago levels. Natural gas has rebounded from its recent lows, but oil continues to trade at a significant premium on an energy content basis.
Optimism Amid Uncertainty—As we enter the final quarter of 2009, a number of important indicators are beginning to show expansion, suggesting that the trough of the current contraction may have come in the second quarter of this year. However, not all incoming information has been positive. Some data suggest that any optimism should be tempered, that this fledgling recovery has a long way to go before the economy achieves stability, and that the key word moving forward is "uncertainty."
Globalization and Monetary Policy Institute Working Paper
Global, Local, and Contagious Investor Sentiment—In this paper, the authors construct indexes of investor sentiment for six major stock markets and decompose them into one global and six local indexes.
Research Department Working Papers
How Robust Are Popular Models of Nominal Frictions?—This paper analyzes three popular models of nominal price and wage frictions to determine which best fits post-war U.S. data.
Improving the ACCRA U.S. Regional Cost of Living Index—The American Chamber of Commerce Research Association (ACCRA) index is used by business and government organizations and the media to to rank living standards and real wages across U.S. cities. In this study we reduce the aggregation bias in the index by calculating national average prices for the 59 item prices using population weights instead of the equal weight formula used by ACCRA.
Stabilization Continues, but Recovery Will Take Time—The Eleventh District economy continues to show signs of stabilization; however, downside risks could hamper growth. Household financial stress and continued softness in the labor market are suppressing consumer spending, and weakness in the energy sector due to low natural gas prices remains a drag on the Texas economy. Commercial real estate is an area of concern and will be for some time.
On October 5, the Federal Reserve conducted an auction of $50 billion in 70-day credit through its term auction facility. The results of the auction are listed on the Board's website.
The Good, the Bad and the Recovery—There are positive signals in the international data, although trouble spots still exist. Emerging markets were showing strong growth in the second quarter. Some advanced economies began growing as well. However, unemployment is rising in most countries, and credit growth in Europe is stagnant. Inflation remains low (negative in some cases) in advanced economies.
The trimmed mean PCE inflation rate for August was an annualized 1.3 percent. According to the BEA, the overall PCE inflation rate for August was 4.2 percent, annualized, while the inflation rate for PCE excluding food and energy was 1.1 percent.
"For purposes of both effectiveness and accountability, the consolidated supervision of an individual firm... is best vested with a single agency. However, the broader task of monitoring and addressing systemic risks...may exceed the capacity of any individual supervisor. Instead, we should seek to marshal the collective expertise and information of all financial supervisors to identify and respond to developments that threaten the stability of the system as a whole. "
"Fed Policy in the Financial Crisis: Arresting the Adverse Feedback Loop" explores how the Fed's recent policy actions have slowed the adverse feedback loop that began when global financial turmoil ended a boom partly fueled by risky mortgage lending.
"I have faith my colleagues on the Federal Open Market Committee will stand and deliver in a timely way. And I expect that when it comes time to tighten monetary policy, my colleagues and I will move with an alacrity that, if needed, will be equal in speed and intensity to that with which we pursued monetary accommodation."
Texas factory activity showed the first signs of bottoming out in September, according to the business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key indicator of current manufacturing activity, came in close to zero as the number of companies seeing increases and decreases was nearly equal. Most indexes of current activity improved, continuing a trend that began in spring.
The FOMC will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period.
"TALF: Jump-Starting the Securitization Markets" finds that new securitization issues increased and risk spreads declined after the TALF began operations. While securitization activity might not grow as rapidly as earlier in this decade, even a smaller, more homogenized securitization sector is important for reviving lending for both consumers and small businesses and for contributing to an economic recovery.
On September 21, 2009, the Federal Reserve conducted an auction of $75 billion in 28-day credit through its term auction facility. The results of the auction are listed on the Board website.
Can Long-Horizon Forecasts Beat the Random Walk Under the Engel-West Explanation?—Engel and West (2005) argue that as the discount factor gets closer to one, present-value asset pricing models place greater weight on future fundamentals. Consequently, current fundamentals have very weak forecasting power and exchange rates appear to follow approximately a random walk. In this paper, the authors connect the Engel-West explanation to the studies of exchange rates with long-horizon regressions.
The U.S. economy appears to be turning the corner toward growth and recovery, and oil prices have bounced back to near $70 per barrel. The Houston economy reacted to this news with fewer job losses in June and July. The energy picture remains mixed, however, as natural gas prices have slid to the lowest levels since 2002.
"As to the Federal Reserve reducing its balance sheet so as not to monetize the excess reserves waiting to be converted to bank loans to the private sector, I have been very clear: Given the lag between the time monetary policy is initiated and when it impacts the economy, that wind-down process needs to begin as soon as there are convincing signs that economic growth is gaining traction and that the lending capacity of the banking system is capable of expansion."
On September 8, 2009, the Federal Reserve conducted an auction of $75 billion in 84-day credit through its Term Auction Facility. The results of the auction are listed on the Board's website.
October 14, 2009 Dallas Office, Houston Branch, San Antonio Branch; November 4, 2009 El Paso Branch—This forum will examine the importance of entrepreneurship to the economy, challenges that small businesses face in the current recession and strategies and tools that organizations are using to support and grow entrepreneurship.
On September 8, 2009, the Federal Reserve will offer $75 billion in 84-day credit through its Term Auction Facility. Additional information regarding the auction is listed on the Board's website.
Post-Traumatic Slack Syndrome and the Economic Outlook (With Thanks to Finn Kydland, Dolly Parton and John Kenneth Galbraith)—"I envision an output path going forward from here that looks something like a check mark, with the Johnny Mercer effect giving us a near-term snapback from the short, intense downstroke, followed by a transition to a long period of slower growth corresponding to the elongated side of the mark."
Ailing Global Economy Limps Toward Recovery—The outlook for U.S. and global growth remains uncertain, but the prospects have improved somewhat. The banking sector appears to have stabilized, but significant levels of slack have accumulated during the current recession (especially in the advanced economies), contributing to the perception that inflation may remain below its long-run trend for a while.
Mexico’s Año Horrible: Global Crisis Stings Economy—Despite being hit hard by a severe global recession, a crackdown on drug cartels, a flu epidemic and trade disputes with the U.S, Mexico has managed to avoid a full-blown crisis, thanks to its efforts to reduce financial vulnerability and deal with several economic shocks.
Rising Protectionist Threat Creates Risks for Texas—Any significant trade restrictions imposed by the U.S. or other countries, especially Latin American nations, could hurt Texas' exports.
On the Record: Taking the Economy's Pulse at Midyear—Four Dallas Fed regional economists update the state's economic performance in 2009. Highlights include employment, manufacturing, housing and energy.
Restoring Banking's Safety Net: Deposit Insurance's Steeper Cost— FDIC premiums are rising for banks in the Eleventh Federal Reserve District—but not as much as they are for institutions in the rest of the country.
Declines in Texas Factory Activity Continue to Moderate, Six-Month Outlook Positive—Results of the Texas Manufacturing Outlook Survey suggest that factory activity continued to contract at a slower pace in August.
The trimmed mean PCE inflation rate for July was an annualized 0.1 percent. According to the BEA, the overall PCE inflation rate for July was 0.4 percent, annualized, while the inflation rate for PCE excluding food and energy was 1.2 percent.
The Federal Reserve on Friday announced that the amounts of Term Auction Facility (TAF) credit offered at each of the two auctions in September will be reduced to $75 billion from $100 billion in August. Specifically, the Federal Reserve will offer $75 billion of 84-day credit on Tuesday, September 8, and $75 billion of 28-day credit on Monday, September 21.
"The Federal Reserve, like other economic policymakers, has been challenged by the unprecedented events of the past few years. We have been bold or deliberate as circumstances demanded, but our objective remains constant: to restore a more stable economic and financial environment in which opportunity can again flourish, and in which Americans' hard work and creativity can receive their proper rewards."
On August 24, 2009, the Federal Reserve conducted an auction of $100 billion in 28-day credit through its Term Auction Facility. The results of the auction are listed on the Board's website.
On August 24, 2009, the Federal Reserve will offer $100 billion in 28-day credit through its Term Auction Facility. Additional information regarding the auction is listed on the Board's website.
"After contracting sharply over the past year, economic activity appears to be leveling out, both in the United States and abroad, and the prospects for a return to growth in the near term appear good."
Further Evidence of Stabilization in Texas Economy—The Eleventh District economy has displayed evidence of further stabilization. Recent data and anecdotal reports indicate the Texas economy is flattening at subdued levels, with some hope of improvement toward the end of the year.
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